Three stock choices as the Department of Defense budget expands

President Obama’s budget proposals have come as good news to the defense industry. Not only is spending projected to increase, weapons acquisitions will go up. Additionally, there is no prospect of any large weapons program being cancelled. The increase in procurement despite a reduction in conflict zones seems to be the signature feature of the budget.

New Priorities

Despite the resolution of older conflicts, new issues have come into focus. These include ISIS, the crisis in Ukraine, and the Ebola outbreak in West Africa. All of this will require a response from the U.S. military and have led to an increase in proposals for the research and procurement budgets which add up to around $180 billion. These budgets have been raised and the decision bodes well for companies who have contracts extending over several years.

The new proposal is for a budget of $585 billion. Of this, $534.3 billion will be allocated for the base budget and $50.9 billion will be utilized for overseas contingency operations. The base budget is $25 billion higher than what received Congress’s approval last year. However, it is also $36 billion more than what sequestration would allow.

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